"Winning Lazy Portfolios Using Fidelity Funds

innova, I agree we are going in circles. OK, so those aren't sector funds, but I'd bet to be top performers, they were heavily invested in the internet, or whatever was hot at the time. For example, AIM funds tend to do great in Growth type markets, but they fall much further than the norm in value type markets. Therefore, a fund like AVLFX which was great during the hot markets, vanished when value became sustained. These types of funds just doesn't incompass AF. I don't know any other way to say it. All those preconceived notions that many on here have, just turn out to be false when reviewing American Funds, I can't help it. They have a philosophy they've been practicing for over 70 years. I realize on here that no one wants to believe Vanguard isn't the savior, but over the last 10, 20 years American Funds beat them easily.
 
but I'd bet to be top performers, they were heavily invested in the internet, or whatever was hot at the time. For example, AIM funds tend to do great in Growth type markets, but they fall much further than the norm in value type markets. Therefore, a fund like AVLFX which was great during the hot markets, vanished when value became sustained. These types of funds just doesn't incompass AF.
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Of course with that said, they were a few months ago the largest holder of GOOG, so perhaps they need to remember their own strategy.
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You said it best :)

I realize on here that no one wants to believe Vanguard isn't the savior
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Vanguard isn't relevant to the discussion, except that Mr. Bogle was responsible for creating the 1st index fund. Most of my holdings are fidelity index funds and ETFs. Its the low-cost passive investing thats key, not choice of fund company.

Anyway, I appreciate that we can continue to talk about this. I think its important to choose a strategy and stick with it.. these discussions help me (and you as well, I'm sure) carefully articulate why we believe what we believe. To me, the main tenet is that over 90% of returns are derived from asset CLASS selection, not fund or stock selection, and to keep costs as low as possible. Therefore, active funds are not completely ruled out if they meet the cost criteria.

The main problems I see with active funds in general:
1) manager turnover
2) excessive holdings turnover
3) Loads / excessive expense ratios
4) style drift (US growth funds shouldn't hold foreign equity) - makes it impossible to know what your AA actually is.
 
ERD, you are immovable because I suggested you post a stock of your choosing to look at, but instead you took the most volatile stock you could find, compressed the chart enough to make illegible, then misread my post to your liking.
As to the mutual fund, I gave you one which most closely mirrored the S&P, but you'd rather pick their lesser performing funds. That's fine, but sheesh, are you telling me you're currently not diversified? You chose funds that make a point for you, and then tell me to do the research myself on the ones that prove you wrong. Apparently you've done the research, you just choose not to post it.
 
You are right - I was going down the list looking for stock funds, wasn't sure if AMCAP was or not so I skipped it at the time, moved on to AMRMX - but anyway. AMCAP underperforms for the 1, 3 and 5 year periods also, but it also outperforms for 10 year:

AMCAP

LOAD ADJUSTED RETURNS
1-Year: 1.32%
3-Year: 5.60%
5-Year: 10.88%
10-Year: 8.22%


VFINX
1 yr 5.39%
3 yrs 8.49%
5 yrs 12.69%
10 yrs 5.83%


I'm more interested in seeing how a fund did in bull/bear markets from the past 20 years than I am specifically in it's total 20 year performance. Especially the bear markets. That tells me something about the volatility that I am concerned about.
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Now we are getting somewhere........;)


No offense FinanceDude, but I'm not sure that the people that feel they need the services of an FA would be the ones to compare the after-expense, risk-adjusted returns of an investment. Offhand, the two funds I looked at appear to have done well when you go back ten years, so they should be happy if that is true of the ones you put them into, and they have been in them for ten years.
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They aren't, but they ARE interested in as they say: "Not getting killed in a bad market". I have a number of clients that have Vanguard holdings because they had them before I started working with them, and if they're happy so am I. All I can tell you is AF is set up to participate in market returns, but not match or beat it, and do better in bad markets than most funds.

So far, it appears to be working, they have $1 triilon in assets, as does Fidelity and Vanguard.

I'm trying to figure out if they (or some strategy) is/are appropriate for someone like me.
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I don't know........but at least we are having a civil conversation about it.............:D

OK, many in this forum do seem averse to active funds. I honestly do not think that is from ignorance or bias - it is from lack of compelling data. Then the big claims from the active fund fans are often followed by 'I know I'm right - you find the data to back up my claims!'.
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Sorry about that, but you seem to be better than me on the Internet. I had a hard time finding the returns of the S&P with REINVESTED DIVIDENDS, it lends much more credibility to any comparison to funds or whatnot.

Conveniently, most rating services like Morningstar DON'T use numbers with reinvested dividends, so to me they are comparing apples to oranges.......;)
 
I think the interesting point is really how poorly the S&P500 has done for the past 10 years. If the year ends flat to down only 5-10 percent the 1yr 5 year and 10 year comparisons will all be near zero a year from now, I would expect recomendations to passive investing to reflect that poor performance by recommending other passive funds, as Scott Burns is doing with his Margarita and every which way but what I said before portfolio.

But back in 1998 the S&P500 was pretty much touted as the long term way to go and why only the S&P500 was needed. Interview with Scott Burns of the Dallas Morning News - Part 1—AllFinancialMatters. I don't think the Vanguard total US stock fund has done much better. But couch potato portfolios get new indexes added that when back tested make a new couch potato result look better. Now he is working his way to the 12 step process of investment recovery he has the first 10: The 2007 Couch Potato Report: Put Sloth To Work For You - 1/20/2008 - NewsChannel 6 WPSD

It may work out very well and using it is fine, I just show this to show even proponents of "passive" investing are continually changing their holdings to meet the hottest trends, and that a "sure way" of passive investing as the original couch potato was portrayed is really no more sure than the top 30 funds in a year.

Per my MSN chart of the S&P500 in February of 1998 it closed at 1,049 by January of 1999 it was 1,249, if the market trends flat to down this year the 5.06% 10 year return showing right now will look rich!
 
innova said:
You said it best :)



Vanguard isn't relevant to the discussion, except that Mr. Bogle was responsible for creating the 1st index fund. Most of my holdings are fidelity index funds and ETFs. Its the low-cost passive investing thats key, not choice of fund company.
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innova, yes GOOG was definitely getting away from their norm, and I told them that in person. They bought it in the 90's. They didn't seem to care what I thought.
As to an index fund, isn't one the same as another and the only relevance is cost? How much effort does it take to pick up the newspaper, say "oh lookie, XYZ has been added to the index!", then buy some shares. I would hope they don't charge much for that!
As to ETF's, like UIT's I think they have their own issues, but they are cheap.
 
Running_Man,

Very good point on Scott Burns. I don't follow his articles, but I can see how horribly hypocritical that looks.

For my justifications of why I do what I do I have to somewhat rely on historical data as well, and there is a very real chance that tilting my portfolio to small and value companies will not result in higher risk-adjusted returns in the future.

What people do not realize, and need to realize, is that the return of the TSM index reflects the net activity of ALL US investors. Just consider your fund manager's probability of 'beating' the TSM (or S&P, if you insist) - its about 50% any given year, right? However, by the second year its 0.5*0.5 = 0.25%.. and so on. This is an oversimplification but the concept is valid.
 
yes GOOG was definitely getting away from their norm, and I told them that in person. They bought it in the 90's.
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GOOG wasn't available to be bought until the IPO in .. 2004 was it?

As to an index fund, isn't one the same as another and the only relevance is cost?
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Absolutely not. I strongly urge you to read more on the subject so you can better understand this. "All about index funds", Richard Ferri will do the trick - you can probably pick this up @ library.

This is a common misconception about index funds. I don't think we can have a cogent discussion about them if that is your understanding.

As to ETF's, like UIT's I think they have their own issues, but they are cheap.
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I suspect you don't understand ETFs all that well either... but to understand ETFs you have to understand indexes and index funds.
 
innova said:
Vanguard isn't relevant to the discussion, except that Mr. Bogle was responsible for creating the 1st index fund. Most of my holdings are fidelity index funds and ETFs. Its the low-cost passive investing thats key, not choice of fund company.
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I don't think any of us will disagree that Bogle is a genius, much like Warren Buffett is a genius......:)

The main problems I see with active funds in general:
1) manager turnover
2) excessive holdings turnover
3) Loads / excessive expense ratios
4) style drift (US growth funds shouldn't hold foreign equity) - makes it impossible to know what your AA actually is.
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Those are the problems in GENERAL, but AF is different, in the 4 areas you mentioned:

1)Management turnover: most AF managers have been there for 20 years or more, the standing joke is "they don't retire, when they die we just add them to the holdings".........
2)excessing turnover: the average AF holding period for a stock is 4-5 years, and their overall turnover rarely exceeds 20% in most of their funds.
3)Loads/excessive expense ratio: Well, they are a load company, but their ER of their funds is low.
4)Style Drift: This was a BIG problem with the folks at Putnam, AIM, MFS, etc. How can you PAY a $100 million dollar fine yet admit "no wrongdoing". AF is a large cap value shop, and their holdings reflect that.
 
innova said:
GOOG wasn't available to be bought until the IPO in .. 2004 was it?



Absolutely not. I strongly urge you to read more on the subject so you can better understand this. "All about index funds", Richard Ferri will do the trick - you can probably pick this up @ library.

This is a common misconception about index funds. I don't think we can have a cogent discussion about them if that is your understanding.



I suspect you don't understand ETFs all that well either... but to understand ETFs you have to understand indexes and index funds.
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Sheesh! I'm worn out! I meant they bought GOOG in the $90's.
As to the variance's in index funds, I'd say is miniscule. If you disagree that's fine, you seem to have done more research on them. I don't use them so haven't researched them as well as I have others. As to ETF's, I understand them just fine. Thanks.
 
Art G said:
Sheesh! I'm worn out! I meant they bought GOOG in the $90's.
As to the variance's in index funds, I'd say is miniscule. If you disagree that's fine, you seem to have done more research on them. I don't use them so haven't researched them as well as I have others. As to ETF's, I understand them just fine. Thanks.
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That's funny..........:D:D:D
 
FinanceDude said:
1)Management turnover: most AF managers have been there for 20 years or more, the standing joke is "they don't retire, when they die we just add them to the holdings".........
2)excessing turnover: the average AF holding period for a stock is 4-5 years, and their overall turnover rarely exceeds 20% in most of their funds.
3)Loads/excessive expense ratio: Well, they are a load company, but their ER of their funds is low.
4)Style Drift: This was a BIG problem with the folks at Putnam, AIM, MFS, etc. How can you PAY a $100 million dollar fine yet admit "no wrongdoing". AF is a large cap value shop, and their holdings reflect that.
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American Funds have done very well over the years. I think that a large part of the reason why is that as FinanceDude points out above they have a lot of similiarities with index funds (low ER and low turnover) and they use a "value" approach. Those factors are likely more important than stock selection.

Also since they are mostly value funds comparing them to the value index rather than the SP500 would probably be a better choice.

MB
 
Art G said:
Maybe this helps....
S&P 500 cumulative return 10 years....77.53% avg. 5.91%

If someone could tell me how to post a list of the American Funds, I think I can do it. However, I've tried and just get jumbled numbers.
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is that WITH reinvested dividends figured in? Otherwise, innova will be along shortly to slap you around........:D
 
FinanceDude said:
I'm still working on 20 and 25 year numbers, but I need the S&P with reinvested dividends numbers to compare...............
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I don't have year-by-year S&P total return, but on the AMCAP 2007 annual report it shows since inception (5-1-1967 to 2-28-2007) annualized total returns for both AMCAP (12.3%) and S&P (10.6%). I called AF and confirmed that both numbers are with reinvested dividends.

Oddly, their report shows ten year total change at 179.2% for AMCAP and 108.6% for S&P. That doesn't match the ten-year Yahoo graph. They aren't exactly the same time period, but pretty close. :confused:
 
Art G said:
Maybe this helps....
S&P 500 cumulative return 10 years....77.53% avg. 5.91%

If someone could tell me how to post a list of the American Funds, I think I can do it. However, I've tried and just get jumbled numbers.
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Vanguard is showing 5.06% as of 1/31/08 I think to compare fairly you must use Vanguard if possible since the S&P index will have no fees whatsoever
 
How on earth did we get from TA for picking stocks to AF versus indexes for investing?

Oh well. Carry on.
 
FinanceDude said:
Well, that is the classic case for investing in passive/index funds. There are SOME people out there (like me) who DON'T index, but not for the UPSIDE (some of which I am willing to give up) but the DOWNSIDE (something no index fund can hedge).

I must be the only person in America that's OK when I am down 10% when everyone else is down 20%, as an example. However, I think that's ok.........:)

Article on persistance of past performance:
Past Performance
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Naw there are at least two of us. That is why I like dividend stocks, there total return is less volatile (the last few month regarding financial stocks are unusual) so even if they lag in a bull market, I am happy as long as they also lag downward in a bear market.

The problem I have with good fund families like American is the front end load. I just can't past the upfront load. DFA is another good family but having to fork over .5-1% of my assets in year to an advisor, who may or man not know more about investing than I do, is none starter for me.

The biggest problem with active funds, is I think it requires three smart choices. First you have to be able to figure out who in advance is going to out perform the market in the future, than you have be the add expenses for active management, then you have to be smart enough to figure out when to get out.
 
TickTock said:
That doesn't match Yahoo's chart either.

Where's the discrepancy?
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Yahoo charts don't include dividends. Makes it impossible to compare anything unless the divs are exactly the same.

You can go to 'historical, DL to a ss and then graph the 'adjusted' column. Fun.

-ERD50
 
I dunno. Yahoo's chart without dividends shows ~+100% over ten years.

ArtG's ten-year cumulative with dividends is +77.5%.

Negative dividends? :confused:

From AF's AMCAP prospectus (ending 2/28/07, so not the same ten year period), S&P500 Index with reinvested dividends is +108.6%, and AMCAP is +179.2%

I'm confused.
 
clifp said:
The problem I have with good fund families like American is the front end load. I just can't past the upfront load.
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Amen! Now, over say, 20 years, it amortises out to a small number, but periodic rebalancing would put a heavy dent into returns.

clifp said:
DFA is another good family but having to fork over .5-1% of my assets in year to an advisor, who may or man not know more about investing than I do, is none starter for me.
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Amen! I like DFA's tightly focused AA funds, but believe the extra costs of buying them erase the gains...
 
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